Lower spectrum floor prices welcome

Telecom regulator Trai wants the government to cut reserve prices to auction spectrum. We approve. Two auctions, in November last year and this March, flopped because floor prices were set at unaffordable levels by a government smarting from allegations of a telecom scam and cowering under a bullying court.

Floor prices should be set as close to zero as possible to attract as many bidders as possible. Auctions see brisk bidding only when the room is crowded, not when just a handful of entities are present. India should gradually move to a regime that allows operators to share spectrum in real time through exchanges: this will free up excess bandwidth held by some players at some point in time, while allowing those in deficit to utilise them optimally.

Spectrum sharing is also necessary if the government wants to introduce a sensible mergers and acquisitions regime in the telecom sector. India has the highest number of mobile service providers among all major markets.

Merger targets are supposed to be players who would now like to exit this crowded space, acquirers would be larger companies looking to consolidate their grip on the market. But M&As should not be driven just to get a slice of captive bandwidth. Spectrum sharing will make company valuations more rational.

In any case, the government must shed the mindset that looks upon radio waves as a source of revenue for the exchequer. India has a robust revenue system, which can be beefed up further, to fill its coffers. Cheap spectrum will enable the rollout of vast data networks, which could be used for financial inclusion, business transactions, healthcare, education and entertainment for millions of people.

That itself could transform the lives of those who now have little or no access to the formal sector. And the new income generation made possible by such cheap, high-speed data connectivity would generate ample revenues for the government. To value direct revenue from spectrum more than its value in spreading connectivity is to buy into the CAG’s flawed estimate of loss.